"Renewed market tensions in the eurozone's periphery, particularly in Italy, and dimming growth prospects have led to further deterioration in the operating environment for Italian banks," S&P said.

One of the major problems facing most European banks is their undercapitalization and S&P believes that Italian banks and financial institutions will need more funding than their other European counterparts.

The downgrades come as the eurozone debt crisis drags on. It's been more than 18 months since the crisis started. In that time, it's grown into the biggest challenge the European Union has faced since the adoption of the euro as its single currency 12 years ago.